PRT: Gold And Silver Sell Off Places Copper Miners Back At Top
Known in some circles as "Dr Copper", in the belief that changes in its market pricing most accurately predicts forward changes in global economic activity, the orange metal now leads forward the best-performing global mining subsector, over the past 12 months, in the form of broadly defined copper miners. The change in the pecking order has taken less than five trading days, a period when investors have heavily sold off, in particular, gold stocks, and even more so, silver stocks.
Gold bullion prices have fallen around USD 45 an ounce in less than four trading sessions, to around USD 946 an ounce. While the investible market value of listed gold stocks aggregates at about USD 261bn, the primary silver sector, led by Fresnillo, is a more modest USD 20bn; the number for listed copper stocks is around USD 120bn.
Much of the investible market value in copper stocks is wrapped up in diversified stocks; Freeport-McMoRan, BHP Billiton, Xstrata, and Rio Tinto rank as No 2 to No 5 in global copper production. The top spot, occupied by Chile's State-owned Codelco, represents value not available to investors in the normal sense.
Listed copper miners have shown a remarkable resilience during the so-called global markets crisis, underpinned by a commodity price that bottomed, in December 2008, at levels where the vast majority of copper miners were still making cash profits. In some related sectors, such as nickel and lead, miners were forced to scale back production on a huge scale, as cash losses bit deeply in.
Aluminium remains the exception, being an area where cutbacks have been stubbornly low, sustaining the worst base metals price performance since early 2002, when the so-called commodities supercycle developed its first set of legs, before going out on a speed ticket around the middle of 2008.
Quoted copper prices collapsed from record levels around USD 4.06/lb in mid-2008 to USD 1.28/lb, and have since soared by 77% to current levels around USD 2.26/lb. Copper made new highs for 2009 this past Tuesday followed by new year-highs on Friday for aluminium, tin, nickel and lead; it is only zinc, so far, that has not made fresh year-highs this month.
